Mazars Tax Alert: Waiving VAT for the delivery of electricity and gas

The decision is seen to be widely controversial among the professional public, as it is, inter alia, contrary to the VAT Directive.

Given the fact that, according to our information, the decision will not be revised and it has been declared that its fulfilment will be strictly required by the financial administration, we provide basic information below on the issue according to an interpretation published by the General Financial Directorate (hereinafter referred to as the “GFD”).

1. Subject of the Decision

The subject of the decision is the waiving of VAT on the supply of gas and electricity, both to households and business subjects.

In the case of gas, it must be remembered that the waiver only relates to the gas that is intended or offered for sale for

• motors, or
• for the production of heat (regardless of the method of heat consumption).

2. Waiver period

The VAT waiver applies to all obligations to declare VAT on the supply of electricity and gas in November and December 2021, whether this obligation is linked to the moment of the taxable supply (i.e., the date of the taxable supply occurs in November or December 2021) or to the moment of acceptance of an advance (i.e., the advance is accepted in November or December 2021).

In this context, we would like to remind you that the supply of gas and electricity through the distribution systems is considered to have been made on the day of the deduction from the measuring equipment. Only if actual consumption is determined primarily on the basis of other parameters (e.g., a calculation according to the area of the floor space), the date of realisation of the taxable supply is the date the actual consumption is determined. For other forms of gas and electricity distribution, the date of the taxable supply may be linked to the moment of delivery, i.e., the moment of the transfer of the right to dispose of the goods as the owner. This situation must be assessed on an individual basis.

3. Issuing tax documents

The supplier shall continue to be obliged to issue tax documents except where the recipient is a non-taxable entity (e.g., a citizen). Neither the VAT rate nor the amount of the VAT will be indicated on the tax document.

Already issued payment plans remain valid subject to the fact that the data on them for November and December 2021 will only be treated as a payment rule, since the advances received during this period are exempt from VAT and therefore the beneficiary cannot establish a right to deduct the VAT.

4. Reporting in VAT returns

The supplier shall report the supply of gas and electricity on line 26 of the VAT return.

The supplier shall report the supply of gas and electricity under the reverse charge regime on line 25 of the VAT return. According to information from the GFD, the recipient of the fulfilment under the reverse charge regime is, somewhat surprisingly, obliged to indicate the received transaction on line 26 of the VAT return.

5. Failure to respect the Decision

A number of gas and electricity suppliers (including landlords) are likely to decide to not proceed in accordance with the decision and to charge VAT for technical or administrative reasons.

It should be noted that the Decision procedure is likely to be enforced with regard to this matter. The Financial Administration will therefore evaluate the procedure by obliging the supplier to declare VAT on the grounds of the presentation of the tax on the document (the VAT can be corrected in such a case on the basis of Section 43 of the VAT Act), but the recipient is not entitled to deduct the VAT.

The Decision is linked to a number of interpretation and practical problems arising from individual settings in lease agreements, the method of billing of services and energy, etc.

If you have any questions about this issue, please do not hesitate to contact us. We will be happy to discuss the individual situation with you by mutual agreement.